UK property suffers ‘noticeable slowdown’ in December as market waits for Brexit decision

ONE OF the first reports on housing market performance for December 2018 was released this morning, highlighting that average levels of house price growth stalled in the face of uncertainty regarding Brexit negotiations.

The figures, compiled by one of the country’s biggest lenders, Nationwide, highlight that average prices cooled slightly on a monthly basis, dropping by 0.7 per cent, whilst annual growth stayed in positive territory – just – at an average year on year increase of 0.5 per cent. The reason suggested for this slow-down is that many buyers and sellers sat tight last month “waiting to see” about Brexit, creating inertia in what would probably be an otherwise functioning market. Given that the news headlines were mostly focused on Theresa May’s negotiations with Brussels in December, it’s not a surprise that many people decided to hold off committing to such a major purchase. Many consumers had thought that a way forward would have been agreed and ratified prior to the Christmas break, but with that clearly not being the case, it’s created a ‘holding pattern’ in many areas.

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UK house price growth slowed noticeably as 2018 drew to a close, with prices just 0.5 per cent higher than December 2017

Robert Gardner, Nationwide

Whilst December is generally recognised as a quieter month for the housing market, a significant number of transactions normally do still take place. For example, 99,100 residential properties were sold in the last month of 2017. This would lead many to conclude that it wasn’t just the normal festive frolics which had an impact on activity.

Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, explained: “UK house price growth slowed noticeably as 2018 drew to a close, with prices just 0.5 per cent higher than December 2017.

“This marks a noticeable slowdown from previous months, where prices had been rising at a circa two percent pace.

“However, it is broadly in line with our expectations; since the start of the year we had been anticipating a price rise of circa one per cent in 2018.”

Robert continued: “Indicators of housing market activity, such as the number of property transactions and the number of mortgages approved for house purchases, have remained broadly stable in recent months, but forward-looking indicators had suggested some softening was likely.

Property UK: December figures released today show a subdued month across the UK (Image: Getty Images)

“In particular, measures of consumer confidence weakened in December and surveyors reported a further fall in new buyer enquiries towards the end of the year.”

“It is likely that the recent slowdown is attributable to the impact of the uncertain economic outlook on buyer sentiment, given that it has occurred against a backdrop of solid employment growth, stronger wage growth and continued low borrowing costs.”

“Near term prospects will be heavily dependent on how quickly this uncertainty lifts, but ultimately the outlook for the housing market and house prices will be determined by the performance of the wider economy, especially the labour market.”

Robert concluded, “The economic outlook is unusually uncertain. However, if the economy continues to grow at a modest pace, with the unemployment rate and borrowing costs remaining close to current levels, we would expect UK house prices to rise at a low single-digit pace in 2019.”

Mark Readings, Managing Director of online estate agency House Network, said of the current market inertia, “Faced with a no-deal Brexit scenario, we have ended up with a no-deal housing market.

Property UK: December is usually recognised as a quieter month for the housing market (Image: Getty Images)

“As we move into 2019 with political instability, fears around Brexit are still playing a huge part in the lack of certainty amongst both buyers and sellers, although we expect to see this confidence slowly regained once the government's plans to leave the EU are finalised.”

But this isn’t the case across all of the UK, as the Nationwide data does highlight a mixed picture across the regions. For example, Northern Ireland recorded the strongest growth in 2018, with prices up 5.8 per cent, and Wales saw prices rise on average by four per cent across the year.

Scotland also experienced an average annual upturn in prices, albeit at the more modest rate of 0.9 per cent, whilst England saw the smallest rise of just 0.7 per cent over the year.

Within this broader picture, further disaggregation between the regions in England was evident, as the North West, East and West Midlands, and Yorkshire and the Humber saw house price growth remain broadly stable in the three percent to four percent range. However, as has been well documented over the last few months, London and the South East saw average prices slide into negative territory in 2018, quite significantly so in some conurbations.

Despite this, there is still very much a ‘North South’ divide as far as average house prices are concerned as the Nationwide report reveals that the price of a typical home in the South of England (£329,240) is still almost double that in the North (£166,642).

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Property UK: London and the South East continued to see the worst results in the UK (Image: Getty Images)

Going forward then, what can we expect for 2019? Brian Murphy, Head of Lending for Mortgage Advice Bureau suggested: “The softer year on year average growth figure of 0.5 percent from the Nationwide is within market expectations for 2018, however one might suggest that this is masking the better performance of some regions, where significant growth has been reported for most of 2018, and consumer confidence has remained resilient for much of the year.

“This more nuanced picture obviously isn’t reflected in the headline figures, but as the current political and economic uncertainty continues, could well continue to be the case until such times as more clarity is available.”

Looking ahead, January and February are normally two of the busier months of the year, as those who are keen to move in the Spring get into buying and selling mode, whilst estate agents see a spike in vendor invitations to value their homes for sale and applicant registrations.

Given the current lack of direction around our departure from the EU, we may not see the same trend repeated this year across all of the country, as it could take the property market some time to pick up speed again.

On the flip side, it’s quite possible that once more is known one way or the other, currently building pent-up demand in some areas could still create a Spring bounce, albeit perhaps more in terms of levels of activity than a significant growth in values.